Top three cash ISAs with high interest as April deadline looms

Amid continued economic uncertainty, savers have been searching for the most lucrative places to put their hard-earned cash. Those looking to capitalise on this year’s ISA personal allowance before the start of the new financial year on April 6 may be considering a stocks and shares ISA. However, a finance expert warns investors must be “comfortable” with risk as market volatility has seen funds take a hit.

According to Moneyfacts research, the average stocks and shares ISA fund experienced a loss of 3.27 percent between February 2022 and February 2023, which is much more subdued than the 6.92 percent growth seen between February 2021 and February 2022.

In contrast, the Moneyfacts average cash ISA rate returned 1.71 percent between February 2022 and February 2023. This compares to 0.51 percent between February 2021 and February 2022.

Commenting on the ISA market, Rachel Springall, finance expert at Moneyfacts, said: “Stocks and shares ISAs suffered an overall loss over the past 12 months, with most primary fund sectors returning a loss.

“This should not be much of a shock considering the significant volatility felt across the markets over the past year, but it does emphasise the importance of keeping track of investments and ongoing fund performance.”

According to Ms Springall, cash ISAs have rebounded in comparison, thanks to competition and consecutive Bank of England Base Rate rises.

Ms Springall continued: “Cash ISAs are traditionally a more popular choice among consumers, but some investors may well be reconsidering their attitude to risk in hopes of growing their pot over the longer term.

“Indeed, HMRC data showed a rise in the number subscribed to stocks and shares ISAs between 2020 and 2021, but cash ISAs held the majority share. Over more recent years, there have even been ISAs created to encourage consumers to save for a home or retirement, such as with a Lifetime ISA.”

The right ISA for any saver will come down to their individual needs, however, Ms Springall noted: “Those considering stocks and shares must keep in mind that past performance is never guaranteed to be reflected in future returns, so it’s vital investors are comfortable with their level of risk.”

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She also said savers would be “wise” to compare the latest cash ISA rates if they want to take advantage of their current ISA allowance as enticing deals are already entering the top rate tables.

She continued: “Those looking to move their older ISAs must be sure to transfer these to another ISA so they can retain their tax-free wrapper and keep in mind not every deal will offer this option.

“It is also worth considering the Personal Savings Allowance (PSA) when comparing savings accounts against ISAs. Whether someone is savvy with investing in funds or just a beginner, it is always wise to seek advice and regularly review any risk profile.”

Virgin Money is currently offering savers an AER or 4.25 percent on its One Year Fixed Rate Cash ISA Exclusive (Issue 4). Interest is calculated daily and paid at the end of the fixed term on January 31, 2024.

Some or all of the money can be withdrawn during the fixed term, but it can’t be put back in, and any amount paid into the account will count towards the person’s annual ISA allowance limit even if they later withdraw it.

Savers will also be charged 60 days’ interest on the amount taken out during the fixed term.

Savers with Virgin Money can also have access to special deals across the wider Virgin Group that can help people save on things like everyday essentials, as well as bigger things like days out and holidays.

Gatehouse Bank’s Three Year Woodland Cash ISA is currently offering an AER of 4.2 percent.

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Gatehouse Bank operates under Sharia principles, which means profit is earned instead of interest. And with a Woodland Saver, a new tree planted in UK woodland per bank account opened or renewed.

This account requires a minimum deposit of £1,000 to open and interest is paid on the anniversary. Withdrawals are also permitted for each account, however, a penalty charge will be added depending on the account. The Three Year Cash ISA will be subject to a reduction in profit of 270 days.

Close Brother Savings’ Two Year Fixed Rate Cash ISA is offering an AER of 4.05 percent.

Savers can open this account with a minimum deposit of £10,000 and interest is calculated daily and paid annually and at maturity. Early transfers or closures will be subject to a penalty charge.

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